Lawsuits against the insurance giant began almost immediately after its merger in 1999. Unum (formerly named UnumProvident) was formed by the merger of Portland, Maine’s Unum and Chattanooga, Tennessee’s Provident. In 2002, the company was sued by a group of attorneys representing denied disability claimants.

The CBS new program 60 Minutes picked up the story and aired a devastating expose of Unum’s unsound business practices. Its reputation has never rebounded, probably because its ways of doing business have hardly changed.

Unum has been called an “outlaw company” by California Insurance Commissioner John Garamendi and a “rogue firm” by the BBC. Yet Unum reported 2 positive years with a third one in the making despite all the negative press, the major setbacks, and the notorious track record of wrongly rejecting legitimate claims. In 2007 and 2008, Unum professed to have made $679 and $553 million respectively, even though its shares were valued under $2. Latest estimates show Unum profiting at about $2.50 per share, which is remarkable in today’s economy.

Too remarkable, perhaps. According to Barron’s, “One place in Unum’s financials where investors might want to look closely is the company’s reserves for future claims. As insurance icon Warren Buffett points out, reserves in essence are self-graded exams allowing insurers, depending on their assumptions, to boost or punish earnings.”

Barron’s reports that Unum is able to report profits by paring its reserves. “Over the past six years, this account has fallen from 6.3% of Unum’s total reserve (before mark-to-market adjustments) to 4.9% last year,” the report says.

It would be interesting to see whether Unum could post some real profits by changing its ways — however risky or maligned with Wall Street those ways might be – real change from the inside out and not just an image makeover. In this age, with so many of the old economic and political paradigms crumbling around us, it probably wouldn’t be a bad idea for Unum to bank on honesty instead of smoke and mirrors for a change.

SOURCE: Unum Denied Disability Claims › Denying disability may be just one of Unum’s profitability tricks

“Some companies have discovered that they can make more money by simply paying out less,” the AAJ report states. Unum routinely challenges legitimate disability claims, hoping that frustrated claimants will give up or settle for less than their claim is worth. The insurance company is also accused of devising a cost-cutting scheme in which claimants are directed to file for Social Security disability insurance benefits first, even though the claimants may be completely unqualified for such benefits. Claimants who failed to follow the procedure had their benefits cut by Unum, and the process added unnecessary stress to the already overburdened Social Security system.

Other Unum claimants, such as Debra Potter, who actually sold Unum disability policies for years, had their legitimate claims flatly denied for inappropriate reasons. When Potter was diagnosed with multiple sclerosis and filed a disability claim, Unum denied the claim, saying that her condition was “self reported.” Her doctor wrote several memos to Unum’s claim department telling them that “there is no basis to support that her complaints are anything other than legitimate.” Her employer, BB&T appealed to Unum on Potter’s behalf. Even the Social Security Administration concluded Potter was totally disabled. And social security disability is notoriously more difficult to claim than insurance from private providers. But Unum denied her.

After three years, Potter finally hired an attorney and Unum agreed to pay her disability claim.

Unfortunately, Potter’s experience is not an isolated incident. It’s a matter of practice. “The 10 worst insurance companies that made the list did so because of their shameful treatment of policyholders,” said Gibson Vance, president of the Alabama Association for Justice, in a response to AAJ’s report.

SOURCE: Unum Denied Disability Claims › Unum second on list of the worst American insurance companies